The responsibility for investors’ success does not rest solely with advisors

A while back I attended a seminar put on by the Rotman School of Management. The speaker was Mo Lidsky, a well known investment professional and author. One of the books he’s written, “Partners in Preservation: How to Know Your Advisor is Truly Protecting Your Wealth” is one I’ve read and recommend.

During the question period that followed his presentation, someone in the audience asked: “How would I know when I meet somebody that they’re an advisor I’d want to have?”

If you’re thinking that asking about how long they’ve been in business, their investment

track record or client turnover rate would provide you with the answers you need, I have a surprise for you: that’s not the case.

It’s actually up to you

In fact, it’s a matter of common sense. Because as an investor, as a client, as a potential client, you have a responsibility to educate yourself — to arm yourself with the knowledge, and confidence, you need to make good decisions.

Don’t get me wrong. I’m not suggesting that you need to know how to pick a stock or a fund. But you do need to understand yourself — what your investment philosophy is, what makes you comfortable and uncomfortable, what’s reasonable to expect of an advisor, what your short and long term goals are, and whether or not they’re realistic.

You should think about, and take note of, why you buy something — aside from the fact that your advisor recommended it, or a friend, colleague or family member owns it. Understand what made you say “yes” — or “no” for that matter — when you decide against a particular investment. Understand why you sell an investment.

Understand enough about all the investment options out there to discuss them with your advisor and then know whether or not they’re for you. Understand diversification, the need for rebalancing and the discipline it takes to be a successful investor.

Here’s what I think that seminar attendee was really asking

After spending more than 30 years in the business and having spoken to countless investors, experience tells me this is what was behind that question:

“How can I be sure we’ll be compatible, that we’re on the same page, that we share the same investing principles, that I can trust him or her with mine and my family’s future, that I can trust myself to hire the right advisor?”

My response?

Invest some time and take advantage of the many ways you can easily educate yourself. And don’t abdicate all the responsibility to your advisor — participate.

Alan Friedman is an Investment Advisor with CIBC Wood Gundy in Toronto. The views of Alan Friedman do not necessarily reflect those of CIBC World Markets Inc. CIBC Wood Gundy is a division of CIBC World Markets Inc. a subsidiary of CIBC and a Member of the Canadian Investor Protection Fund and Investment Industry Regulatory Organization of Canada. If you are currently a CIBC Wood Gundy client, please contact your Investment Advisor.